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Wednesday, 22 June 1994
Page: 1835

Senator WATSON (11.15 a.m.) —The Superannuation Laws Amendment Bill 1994 currently before the Senate is the second superannuation bill that we have dealt with this year. It seeks to extend certain aspects of the superannuation industry supervision legislation to the superannuation benefits enjoyed by federal parliamentarians. I remind the Senate that in October last year we examined the SIS bills, a package of bills to supervise superannuation in relation to insurance, which imposed upon certain superannuation funds prudential controls aimed at ensuring the security of members' benefits. Those bills will largely come into operation in a few days time on 1 July.

  Although SIS exempts unfunded public sector superannuation schemes from the SIS arrangements, the government has decided, and we agree, that all Commonwealth schemes should comply with the main operative provisions of SIS. Generally they are what is known as vesting, preservation and disclosure. Having been involved very closely in this matter as chair of the Senate Select Committee on Superannuation, I say that this is a good thing. It brings the superannuation conditions of parliamentarians into line with those generally enjoyed in the general community. Too often politicians are criticised for living in an ivory tower but now we will be subject to the same rules and the same conditions as our constituents.

  In order to effect these changes the bill primarily amends the Parliamentary Contributory Superannuation Act 1948. It also makes consequential amendments to the Parliamentary Contributory Superannuation Amendment Act 1981 and the Parliamentary Contributory Superannuation Amendment Act 1983. As recently as 5 May we saw a bill, called the Superannuation Legislation Amendment Bill 1994, to extend the SIS type provisions to public sector superannuation schemes. That bill and the bill before us today will commence with the same types of conditions on 1 July 1994.

  I am particularly pleased that the parliamentary superannuation scheme will be subject to the SIS requirements given my very heavy involvement, as I said, in the superannuation area, particularly as chair of the Senate Select Committee on Superannuation and also as a trustee of the parliamentary retiring allowances trust. The parliamentary superannuation scheme will be required to comply with SIS and associated regulations—I remind the Senate that those regulations are currently before our committee for evaluation—in relation not only to vesting and preservation of members' benefits and disclosure of information to members of the scheme but also to correcting inequities relating to former members who hold offices of profit, invalidity retirements and transfers between the Commonwealth, state and territory parliaments. There are also minor amendments to spouse benefits.

  I wish to discuss firstly what is known as the vesting requirements. Vesting actually refers to the conferring on a superannuation fund member the ownership of all or part of the accrued benefit payable to that member. SIS and the superannuation guarantee legislation require that all employees receive a minimum level of employer sponsored superannuation support. I remind the Senate that in the 1993-94 financial year for employers with a payroll of less than $1 million the required level was three per cent and for those greater than $1 million the required level was five per cent. From 1 July employers with a payroll under $1 million will find that this level will rise to four per cent.

  In the parliamentary superannuation scheme, the government finances lump sum benefits payable on voluntary retirement of one and one-sixth times the member's contribution. This is regarded as meeting the five per cent superannuation guarantee minimum. However, where a member will not qualify for a pension, in some cases, the lump sum will not meet the prescribed standard. To meet this contingency, the bill amends the Parliamentary Contributory Superannuation Act 1948 to increase these lump sums to ensure that they meet the minimum requirements of the superannuation guarantee legislation through the use of what is referred to as a `top-up' benefit where the benefits otherwise payable from the scheme fail to comply with the superannuation guarantee minimum requirements.

  The second major SIS requirement that the parliamentary superannuation scheme will adhere to is preservation. At present the parliamentary super scheme does not require members' superannuation benefits to be preserved. However, SIS requires certain lump sum benefits to be preserved in a superannuation or approved deposit fund until beneficiaries reach the preservation age which is currently 55 and retire from the work force, or be used to purchase a deferred annuity which cannot be accessed until the preservation age is reached. The bill will require the preservation of lump sum benefits in line with SIS conditions and requirements. This is important, because members of parliament should not be subject to rules as to preservation which are different from those applying to the majority of the community.

  The third element of SIS that the parliamentary superannuation scheme will adhere to is the disclosure requirements. Currently, there are no obligations on the parliamentary superannuation scheme to disclose information to members. However, as all honourable senators would be aware, the scheme does provide us with an annual statement of accumulated benefits. I understand that the Department of Finance currently administers the scheme in full compliance with all disclosure requirements.

  The bill that is before us will require that certain information be disclosed to members in line with the requirements of the SIS regulations. The regulations, which were formally gazetted on 11 March 1994 and, as I said, which are the subject of an inquiry at present by the Senate Select Committee on Superannuation, strengthen obligations on trustees to provide information to members and others so that there is a better understanding of benefit entitlements and the way the fund is managed. The disclosure requirements are of particular interest to me, as I said, as a trustee of the parliamentary retiring allowances trust.

  The regulations specify the information that must be provided to new members, to continuing members on the occurrence of an important event, when there is a request for information, and to members leaving the fund. They also specify time limits within which information must be provided, the persons to whom the information is to be provided, and the method of providing the information.

  The bill also seeks to correct a number of inequities that currently arise in the parliamentary superannuation scheme. The first of the inequities arose in relation to the holding of an office of profit. Currently, where former members hold an office of profit and receive remuneration for their services, I remind honourable senators that their pension is reduced on a dollar for dollar basis up to the maximum reduction. In addition, former members cannot earn any money from holding an office of profit without their pension being reduced. I remind honourable senators that an office of profit extends to agencies and parliaments of states and territories.

  What this bill will do is important. I remind honourable senators that senior bureaucrats leaving the Commonwealth Public Service can take up a posting or a series of postings and receive full remuneration for that particular service that is rendered, without any reduction to their pension entitlement. This bill does not go quite as far as providing a full entitlement, but provides some measure of relief from complete exclusion.

  The bill will do three things in relation to the holding of an office of profit. Firstly, it introduces a monetary threshold of office of profit salary before the implementation of any reduction in parliamentary pension. Secondly, it provides for unaffected salaries payable in respect of offices of profit to be increased to the level of the taxed salary that would apply to produce the same net salary as the tax free salary. Thirdly, it abolishes the reduction of parliamentary pension where the beneficiary is receiving a pension arising from an office of profit. The monetary threshold is equivalent to 20 per cent of the parliamentary allowance, before any reduction of pension. Above that threshold, the pension is reduced by 50c for each dollar of income earned from the office of profit.

  I am pleased that these amendments are being made because it is extremely inequitable that a former parliamentarian who holds an office of profit, even in a state jurisdiction, as opposed to a position in the private sector—or even compared to the position of a person in the bureaucracy—should lose so heavily on his pension if he receives any remuneration for his services. It is difficult to think of any other superannuation plan where the obtaining of employment reduces the pension that the super fund must pay. As the provisions existed, there was strong incentive for former members to work only in the private sector after leaving this parliament. I believe they should be encouraged to share the benefit of their wisdom and knowledge gained here for the benefit of both the public and private sectors of the economy. The new threshold ensures that earning a paltry wage from the holding of an office of profit does not affect a member's pension entitlement.

  Another area where there is currently inequity is in the area of invalidity retirement benefits. Currently, the trust may grant a member invalidity retirement if it is of the opinion that the member's resignation from parliament is bona fide on the grounds of ill-health. There are certain deficiencies here for two reasons: firstly, there are no criteria to follow in deciding invalidity cases; and, secondly, either a member was held to be invalid or failed to be found invalid. One of the difficulties with this criterion was that there was no middle ground. The consequences were very different depending on the trust's decision. There was no arrangement for a graduated access to full invalidity benefit in recognition of special demands of parliamentary service.

  The bill makes amendments to establish procedures to be followed where there is an application for invalidity retirement. It establishes three degrees of invalidity retirement with differing benefits applying to each. It provides a mechanism to review invalidity assessments. The three-tiered system comprising classes A, B and C are based on incapacity in relation to employment outside parliament. I understand there are similar three-tiered invalidity provisions in the defence force superannuation scheme. So we are not creating any special benefits outside those generally enjoyed in the public sector.

  The amendments allow, on their face, only the trust's decision with respect to classifications A and B to be reviewed and not classification as class C. However, I understand that persons classified as class C invalids would be able to have their classification reviewed by the Administrative Appeals Tribunal.

  The final area where there was inequity which the bill seeks to address is the recognition of state and territory parliamentary service. The amendment will not allow periods of state or territory service to be recognised in the Commonwealth parliamentary superannuation scheme—and this is important—unless the member elects to pay the Commonwealth scheme a share of the transfer value. Again, that is equitable and fair.

  Before my time expires I would like to recognise the government's decision to extend the main SIS requirements of preservation, vesting and disclosure to the Commonwealth parliamentary superannuation scheme. At the end of the day, if parliament seeks to impose rules on the community, then parliamentarians should be subject to the same rules. For that reason, I support the bill.